CIRT Sentiment Index€¦ · 10% 2% 2% 72% 49% 39% 46% 7% 13% Other No change April 11-17 April 27-May 1 May 9-15 June 12-18 Projects postponed or halted due to shifting owner- and/or

CIRT Sentiment IndexThird Quarter Report

CIRT Sentiment Index Q3 2020 | fminet.com

1

EXECUTIVE SUMMARY

The third quarter of 2020 experienced a return of optimism in both the

overall Sentiment Index and in the Design Index segment when compared

with last quarter’s results. The Sentiment Index surged from 21.6 to

52.1, while the Design Index increased from 39.8 to 49.3, historic rises

in both measures. This rebound appears to reflect improved confidence

through the end of the year, particularly compared to the significant losses

experienced during the second quarter. Government stimulus, relaxing

of social distancing restrictions, states reopening businesses and travel,

as well as improved client confidence have all contributed to improved

expectations, especially across construction-focused members. However, if

the Design Index continues to remain below 50, it would tend to indicate

or suggest fewer construction opportunities in the future.

Over the past quarter, CIRT members were asked, on an ongoing basis a

series of questions addressing organizational response and industry im-

pact of the various economic disruptions seen through the first half of the

year (including COVID-19, depressed oil prices, market volatility, etc.).

Since March, nearly all respondents have limited business travel and staff

exposure both on-site and at the office, while nearly half have reduced

staff and overhead.

INDEX MOVEMENT

Q22020

Q32020

Productivity 40.9811.21

Our Construction Business 19.237.69

Nonresidential Sector 54.175.26

Overall U.S. Economy 75.410.86

Cost of Labor 54.9250.86

Economy Where We Do Business

68.030.86

Backlog 49.1839.08

Cost of Materials 51.6455.17

Notwithstanding over time, it is encouraging to track receding organizational response, particularly fewer postponed spending decisions,

meetings and project schedules. Similarly, fewer project disruptions over time have been associated with state and local restrictions, resource

availability and/or decline in labor productivity. However, industry demand modifications over the same periods indicate an increasing

share of respondents have experienced postponed or canceled projects due to shifting owner- or economy-related dynamics.

Current issues topics in this quarter’s survey addressed perceived change in worker productivity, compensation adjustments, sources of

news information and U.S. versus international recovery. Just over half of all respondents reported productivity declines on active job sites

following social distancing policies (52%), and just under one-third reported lower productivity among office staff (31%). Going forward,

most remote work policies will include more flexibility (89%). For domestic and international social, economic and political news, respon-


2

CIRT SENTIMENT INDEX AND DESIGN INDEX SCORES FROM Q3 2018 TO Q3 2020

Index Scores

Design IndexSentiment Index

0

20

40

60

80

100

Q3 2020Q3 2019Q3 2018

Current Sentiment Index Score

Current Design Index Score

52.149.3

62.763.6

70.773.0

66.3

73.4

64.8

70.865.0

70.164.9 63.2

57.660.9

39.8

21.6

49.352.1

dents primarily rely on newspapers (62%) and television news networks (52%). For design and construction industry news, respondents

most frequently utilize internet news aggregators (65%) and magazines (59%). Lastly, fifty percent of respondents expect the U.S. will

recover faster compared to other foreign countries, while (23%) see the timing about the same with another (21%) that suggest recovery

timing and performance will be mixed. Only (5%) expect U.S. will be slower compared to other foreign countries.

Among the industries represented by CIRT’s member base, lodging, office, education and international work are projected to experience

the biggest short-term declines across both the design and construction industries. The design industry’s long-term view of project growth

remains positive, with every sector tracking above 3.0. The construction industry’s long-term view is similarly optimistic, with just two of

the 10 sectors projected below 3.0 (lodging and office).


3

LOCAL AND NATIONAL ECONOMIC PREDICTIONS FOR NEXT QUARTER

The

econ

omy

whe

re w

edo

bus

ines

s w

ill:

The

over

all U

.S.

econ

omy

will

:

Significantly worsen

Moderately worsen

No change over last quarter

Moderately improve

Significantly improve


Moderately worsen


Moderately improve


23%

5%

12%

8%

9%

25%

9%

1%

7%

2%


4

EXPECTATIONS FOR THE RESIDENTIAL AND NONRESIDENTIAL BUILDING MARKETS FOR NEXT QUARTER

CONSTRUCTION INPUT PREDICTIONS FOR NEXT QUARTER

Cos

t of M

ater

ials

Cos

t of L

abor

Back

log

Prod

uctiv

ity

Significantly lowerModerately lower

No changeModerately higherSignificantly higher





Significantly decrease compared with last quarterModerately decrease compared with last quarter

No change over last quarterModerately increase compared with last quarterSignificantly increase compared with last quarter 3%

39%

28%30%

10%

21%67%

20%

23%57%

21%

38%39%

2%

2%

Non

resi

dent

ial B

uild

ing

Con

struc

tion

Mar

ket

Resi

dent

ial B

uild

ing

Con

struc

tion

Mar

ket


Moderately worsen


Moderately improve



Moderately worsen


Moderately improve

Significantly improve 2%

32%

42%

22%

26%

34%

29%

3%

11%


5

MEMBER PROFILE: NUMBER OF CIRT MEMBER COMPANIES IN EACH SECTOR

Construction Design

Publ

ic W

orks

Offi

ce

Man

ufac

turin

g

Lodg

ing

Inte

rnat

iona

l

Indu

stria

l

Hea

lth C

are

Educ

atio

n

Com

mer

cial

Tran

spor

tatio

n

Resi

dent

ial

Pre-

desi

gn w

ork

Inte

rnat

iona

l

Indu

stria

l

Hea

vy/C

ivil

Hea

lth C

are

Educ

atio

n

Con

sulti

ng P

lann

ing

Com

mer

cial

Tran

spor

tatio

n

232221

11

17

3130

17 18

11

171312

7

191914

1921

30


6

PERCEPTION OF CHANGE FOR NEXT QUARTER: CONSTRUCTION

PERCEPTION OF CHANGE FOR NEXT QUARTER: DESIGN

Commercial

Consulting Planning

Education

Health Care

Heavy/Civil

Industrial

International

Pre-design Work

Residential

Transportation

7% 33% 21% 39%

12% 17% 38% 40%

4% 33% 28%

12% 35% 51%

5% 14% 52% 24%

11% 44% 33% 11%

31% 41%

4% 20% 43% 6%

12% 21% 33% 33%

2%30% 35% 31%

35%

2%

5%

28%

27%

Significantly worsen Moderately worsen No change

Moderately improve Significantly improve

2%

Significantly worsen Moderately worsen No change

Moderately improve Significantly improve

Commercial

Education

Health Care

Industrial

International

Lodging

Manufacturing

Office

Public Works

Transportation

6% 29% 24% 39%

4% 34% 38% 22%

19% 40% 3%

12% 29% 57%

6% 9% 52% 30%

29% 38% 21% 11%

5% 51% 11%

14% 22% 22%

18% 27% 47%

16% 35% 3%

38%

3%

33%

40%

43%

6%

3%


7

Since the last quarterly Sentiment Index survey, FMI has asked CIRT members the following two questions on a regular basis to gain an

understanding of changed organizational response and shifting demand for design and construction services over time.

ORGANIZATIONAL RESPONSE TO CURRENT ECONOMIC DISRUPTIONS Since mid-March, nearly all CIRT members have reported limiting business travel and staff exposure on-site and/or in the office, and more

than 80% of members continue these limitations today. Similarly, nearly two-thirds of respondents have recently opted to postpone busi-

ness meetings (69%) and spending decisions (67%). Response in these key factors is down from late March and mid-April, but up from

early May. An increase in members choosing to delay business and spending decisions is suggestive of an uncertain business environment.

Members reporting reduced staff and overhead have also steadily risen over time, from 26% in mid-March to a new peak of 49% in mid-June.

CURRENT TRENDS

87% Limited business travel84% Limited staff exposure

67% Postponed spending decisions69% Postponed business meetings

31% Extended project schedules

49% Reduced staff and overhead

30% Limited business development

13% Delayed future commitments

3% Other0%

20%

40%

60%

80%

100%

March 18-27 April 11-17 April 27-May 1 May 9-15 June 12-18

Survey Dates

HOW HAS YOUR ORGANIZATION RESPONDED TO THE CONVERGENCE OF ECONOMIC DISRUPTIONS?


8

PLEASE IDENTIFY WHERE YOU HAVE SEEN CHANGING DEMAND FOR DESIGN ANDCONSTRUCTION SERVICES RELATED TO THE FOLLOWING:

67%63%

57%

33%

24%

17%

4%

70%

50%48%

38%

18%

8%4%

14%

4%

62%

38%36%

31%

5%10%

2%

14%

2%

72%

49%

39%

46%

8%5% 7% 8%

13%

Other No change

April 11-17 April 27-May 1 May 9-15 June 12-18

Projects postponed or halted due to shifting owner-

and/or economy-related demand

dynamics

Projects postponed or halted due to state and local

restrictions

Decline in labor productivity

Projects canceled due to shifting owner- and/or

economy-related demand dynamics

Limited availability or supporting

resources

Projects postponed or halted due to

resource availability

Increased demand due to

alleviated restrictions and

resources

Increased demand due to

economic response

SURVEY DATES:

CHANGES IN DEMAND FOR DESIGN AND CONSTRUCTION SERVICES Over the past quarter, CIRT members have experienced more frequent project delays due to shifting owner- or economic-related de-

mand dynamics. Alternatively, fewer disruptions over time have been associated with state and local restrictions, resource availability

and/or decline in labor productivity. It is interesting (and somewhat concerning) to note a recent and brief reversal in this trend, with

increased project delays stemming from state and local restrictions at 49% in mid-June, up from 36% as reported mid-May.


9

PRODUCTIVITY AND REMOTE WORKJust over half (55%) of respondents reported productivity declines on active job sites following social distancing policies, and just over

one-third (36%) reported lower productivity among office staff. Conversely, 7% of respondents felt productivity is now higher on active

job sites, and approximately one-third (32%) reported productivity improvements across office staff. Noted productivity gains however are

generally modest. No respondents saw significantly higher productivity on active job sites, and only 3% reported significant productivity

improvements across office staff.

5%

31%

31%

29%

3%

3%

52%

38%

7%

Productivity is significantly lower

Productivity is slightly lower

Productivity is about the same

Productivity is slightly higher

Productivity is significantly higher

Active Job Sites Office Staff

SINCE MARCH 1, CONSIDERING INCREASED REMOTE WORKING POST-COVID-19, WHAT IS YOUR IMPRESSION ON OVERALL PRODUCTIVITY LEVELS ACROSS YOUR ORGANIZATION’SOFFICE STAFF? ON ACTIVE JOB SITES?


10

LOOKING FORWARD, WHICH OF THE FOLLOWING BEST DESCRIBES YOUR ORGANIZATION’SLONG-TERM REMOTE WORK POLICY AS A RESULT OF COVID-19?

28%

61%

9%

2%

Much more flexibility to work remotely after the pandemic is over

More flexibility to work remotely after the pandemic is over

No change to our remote work policy

Less flexibility to work remotely after the pandemic is over

COMBINED INCREASED FLEXIBILITY IS 89%}

Going forward, most remote work policies will include more flexibility (89%). However, few organizations (9%) expect no change to their

remote work policy, and only 2% expect less flexibility.


11

PLEASE RANK (1-3) OUR TOP THREE INFORMATION SOURCES MOST UTILIZED TO TRACK EACH OF THE FOLLOWING:

2%

13%

8%

6%

3%

5%

59%

65%

13%

56%

2%

3%

3%

3%

11%

19%

22%

51%

52%

62%

Facebook

Instagram

Reddit

YouTube

LinkedIn

Other

Other mobile applications

Twitter

Radio

Magazines, including e-magazines

Internet news aggregators and aggregator email subscription

Television news networks

Newspapers, including e-newspapers

Domestic and international social, economic and political news

Design and construction industry news, intelligence and developments

FREQUENCY OF RESPONSE:

SOURCES OF INFORMATIONFor domestic and international social, economic and political news, members largely rely on newspapers (62%), television news networks

(52%) and internet news aggregators and aggregator email subscriptions (51%). Magazines (22%), radio (19%) and Twitter (11%) are also

used frequently when compared to LinkedIn and other social platforms.

For tracking design and construction news, members most frequently utilize internet news aggregators (65%), magazines (59%) and

newspapers (56%). Television news networks and LinkedIn (13%) stand above other channels and social platforms for industry-related

news and developments.


12

WHAT DO YOU ANTICIPATE, COMPARING U.S. AND FOREIGN DESIGN AND CONSTRUCTIONRECOVERY PERFORMANCE?

50%

23%

5%

21%

Generally, the U.S. will be faster to recover compared to other foreign countries

Recovery time will be about the same comparing U.S. and other foreign countries

Generally, the U.S. will be slower to recover compared to other foreign countries

Recovery timing and performance will be mixed

COMPENSATION ADJUSTMENTSince last quarter 40% of respondents have implemented temporary cuts or adjustments to executive pay, and nearly one-third have im-

plemented similar cuts or adjustments to director pay. Across executive pay adjustments, no organizations adjusted only the CEO’s pay.

Of the 60% of respondents who have not made adjustments to executive pay, 12% are considering future adjustments. Of the 71% of

respondents who have not adjusted director pay, 5% are considering future adjustments.

SINCE MARCH 1, HAS YOUR COMPANY MADE TEMPORARY CUTS/ADJUSTMENTS TO DIRECTOROR EXECUTIVE PAY?

29%

66%48%

5%

12%

40%

No

Net yet, but future cuts are being considered

Not yet, but future cuts are likely

Yes

Executive Director

INTERNATIONAL RECOVERYFifty percent of respondents expect the U.S. will recover faster compared to other foreign countries, while (23%) see the timing about the

same with another (21%) that suggest recovery timing and performance will be mixed. Only (5%) expect the U.S. will be slower compared

to other foreign countries. Open-ended statements supporting a faster U.S. recovery highlight the long-term strength of the U.S. dollar,

future/increased U.S. government stimulus, and the industry’s lasting impact on unemployment.


13

DESIGN OUTLOOK

Respondents were asked to comment on how the design sector will change next quarter, six months from now and one year from now. Each

industry score is on a scale of 1 to 5, with 1 being the worst and 5 being the best. Each percentage is a reflection of the change in score in

comparison to the starting average score of the “next quarter” period. Please refer to the “Design Sector Project Growth by Industry” chart

to see a visual representation of the scores. Below are the predominant perceptions of CIRT’s members:

COMMERCIAL Starting average score of 2.74 for next quarter, 2.63 for six months from now, and 3.37 for one year from now.

CONSULTING PLANNING Starting average score of 3.00 for next quarter, 3.21 for six months from now, and 3.50 for one year from now.

EDUCATIONStarting average score of 2.53 for next quarter, 2.79 for six months from now, and 3.26 for one year from now.

HEALTH CAREStarting average score of 3.32 for next quarter, 3.32 for six months from now, and 3.63 for one year from now.

3.17

3.36

3.53

3.62

3.75

3.43

3.63

3.26

3.50

3.37

2.89

2.55

3.35

3.15

3.42

3.14

3.32

2.79

3.21

2.63

3.00

2.73

2.94

2.54

3.17

2.71

3.32

2.53

3.00

2.74

Consulting Planning

Education

Health Care

Heavy/Civil

Industrial

International

Pre-design Work

Residential

Commercial

Transportation

Industry

Design Sector Project Growth

Next Quarter One Year From NowSix Months From Now


14

HEAVY/CIVILStarting average score of 2.71 for next quarter, 3.14 for six months from now, and 3.43 for one year from now.

INDUSTRIAL Starting average score of 3.17 for next quarter, 3.42 for six months from now, and 3.75 for one year from now.

INTERNATIONALStarting average score of 2.54 for next quarter, 3.15 for six months from now, and 3.62 for one year from now.

PRE-DESIGN WORKStarting average score of 2.94 for next quarter, 3.35 for six months from now, and 3.53 for one year from now.

RESIDENTIAL Starting average score of 2.73 for next quarter, 2.55 for six months from now, and 3.36 for one year from now.

TRANSPORTATION Starting average score of 3.00 for next quarter, 2.89 for six months from now, and 3.17 for one year from now.


15

CONSTRUCTION OUTLOOK

This quarter respondents were asked to comment on how the construction sector will change next quarter, six months from now and one

year from now. Each industry score is on a scale of 1 to 5, with 1 being the worst and 5 being the best. Each percentage is a reflection of

the change in score in comparison to the starting average score of the “next quarter” period. Please refer to the previous chart to see a visual

representation of the scores. Below are the predominant perceptions of CIRT’s members:

COMMERCIAL Starting average score of 2.76 for next quarter, 3.12 for six months from now, and 3.18 for one year from now.

EDUCATION Starting average score of 2.57 for next quarter, 2.87 for six months from now, and 3.00 for one year from now.

HEALTH CARE Starting average score of 2.94 for next quarter, 3.32 for six months from now, and 3.55 for one year from now.

INDUSTRIAL Starting average score of 3.06 for next quarter, 3.09 for six months from now, and 3.76 for one year from now.

Education

Health Care

Industrial

International

Lodging

Manufacturing

Office

Public Works

Commercial

Transportation

Industry

Construction Sector Business Outlook

Next Quarter One Year From NowSix Months From Now

3.483.17

3.503.27

2.802.27

4.003.33

2.621.76

3.452.91

3.763.06

3.552.94

3.002.57

3.18

3.17

3.36

2.60

3.71

2.19

3.09

3.65

3.32

2.87

3.122.76


16

INTERNATIONAL Starting average score of 2.91 for next quarter, 3.09 for six months from now, and 3.45 for one year from now.

LODGING Starting average score of 1.76 for next quarter, 2.19 for six months from now, and 2.62 for one year from now.

MANUFACTURING Starting average score of 3.33 for next quarter, 3.71 for six months from now, and 4.00 for one year from now.

OFFICE Starting average score of 2.27 for next quarter, 2.60 for six months from now, and 2.80 for one year from now.

PUBLIC WORKS Starting average score of 3.27 for next quarter, 3.36 for six months from now, and 3.50 for one year from now.

TRANSPORTATION Starting average score of 3.17 for next quarter, 3.17 for six months from now, and 3.48 for one year from now.

ABOUT THE CONSTRUCTION INDUSTRY ROUND TABLE (CIRT)

The Construction Industry Round Table (CIRT) is composed exclusively of approximately 115-120 CEOs from the

leading architectural, engineering and construction firms doing business in the United States.

CIRT is the only organization that is uniquely situated as a single voice representing the richly diverse and dynamic

design/construction community. First organized in 1987 as the Construction Industry Presidents’ Forum, the Forum has

since been incorporated as a not-for-profit association with the mission “to be a leading force for positive change in the

design/construction industry while helping members improve the overall performance of their individual companies.”

The Round Table strives to create one voice to meet the interests and needs of the design/construction community.

CIRT supports its members by actively representing the industry on public policy issues, by improving the image

and presence of its leading members, and by providing a forum for enhancing and developing strong management

approaches through networking and peer interaction.

The Round Table’s member CEOs serve as prime sources of information, news and background on the design/construc-

tion industry and its activities. If you are interested in obtaining more information about the Construction Industry

Round Table, please call 202-466-6777 or contact us by email at [email protected].

The CIRT Sentiment Index is a survey of members of the Construction Industry Round Table

conducted quarterly by FMI Research, Raleigh, North Carolina. For press contact or questions

about the CIRT Sentiment Index, contact Mark Casso at [email protected].

CIRT SENTIMENT INDEX

CONFIDENTIALITYAll individual responses to this survey will be confidential and shared outside of FMI only in the aggregate.

All names of individuals responding to this survey will remain confidential to FMI.

FMI Consulting has a deeper understanding of the Built Environment and the leading firms across its value chain than any other consulting firm. We know what drives value. We leverage decades of industry-focused expertise to advise on strategy, leadership & organizational development, operational performance and technology & innovation.

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Leadership & Organizational Development � Leadership & Talent Development � Succession Management � High-performing Teams � Corporate Governance � Executive Coaching

Performance � Operational Excellence � Risk Management � Compensation � Peer Groups

Technology & Innovation � Market Accelerator � Partner Program � Tech Readiness Assessment � Sourcing & Adoption

SECTOR EXPERTISE

� Architecture, Engineering & Environmental � Building Products � Chemicals � Construction Materials � Contractors � Energy Service & Equipment � Energy Solutions & Cleantech � Utility Transmission & Distribution

SERVICES

� M&A Advisory � ESOP Advisory � Valuations � Ownership Transfer

EXECUTIVE EDUCATION

� Acquisitions in the Construction Industry � Ownership Transfer & Management Succession

FMI Capital Advisors, a subsidiary of FMI Corporation, is a leading investment banking firm exclusively serving the Built Environment. With more than 750 completed M&A transactions, our industry focus enables us to maximize value for our clients through our deep market knowledge, strong technical expertise and unparalleled network of industry relationships.

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We serve the industry as a trusted advisor. More than six decades of context, connections and insights lead to transformational outcomes for our clients and the industry.

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Documents

CIRT Sentiment Index€¦ · 10% 2% 2% 72% 49% 39% 46% 7% 13% Other No change April 11-17 April 27-May 1 May 9-15 June 12-18 Projects postponed or halted due to shifting owner- and/or